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CNN Today

United and US Airways Propose Merger

Aired May 24, 2000 - 2:10 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

NATALIE ALLEN, CNN ANCHOR: The proposed acquisition of US Airways by United Airlines isn't even off the ground and already running into a lot of turbulence. The heads of both carriers formerly announced the $12 billion megadeal at a news conference a short while ago. If it goes through, it would make United, the world's largest airline, an even more dominant presence at airports from coast to coast.

For more on what this deal could mean and the obstacles that may lie ahead, CNN's Jeff Flock joins us from Chicago where United is headquartered -- Jeff.

JEFF FLOCK, CNN CORRESPONDENT: It's difficult, Natalie, to think of United being any more of a presence here in Chicago than it already is. Obviously this is the hometown airline here in Chicago. So it was -- the people here were watching very closely that press conference in New York about an hour ago, when the executives of both US Airways and United announced this megadeal. It will create the biggest airline in the world from what is already the biggest airline in the world, and yet another one. The executives of both companies, talking directly I think, to both federal regulators, as well as the air-flying public this morning in trying to make a case that U.S. airline passengers will get a good deal from this deal.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This merger creates a combined company offering customers unparalleled convenience and service. By bringing together United and US Airways, we believe we have created a global airline that will provide significant benefits to the communities and customers served by our two companies.

(END VIDEO CLIP)

FLOCK: The key is, as they say, one airline, one baggage check, one frequent flyer program. That's what they are trying to sell. The question is: Is this a good deal for airline passengers? We've been talking to them all morning here. And will it pass regulatory muster as well as approval from the labor unions, which have scuttled a similar deal at United between United and US Airways in the past? Those questions, of course, remain to be answered.

Here in Chicago, near the United headquarters, it's interesting and important to point out that this company is 55 percent employee- owned. So, that means that the people who work for this airline will have a big voice in deciding whether or not it gobbles up another carrier. People of course continue to watch it.

I'm Jeff Flock, CNN, reporting live from O'Hare in Chicago.

(END VIDEOTAPE)

KYRA PHILLIPS, CNN ANCHOR: Neither United nor US Airways foresees any downside to their combined companies, but will -- will it fly with the public?

CNN travel correspondent Stephanie Oswald takes a closer look at that question.

(BEGIN VIDEOTAPE)

STEPHANIE OSWALD, CNN CORRESPONDENT (voice-over): Will the creation of a giant airline make the skies friendlier or more frustrating?

PAUL RUDEN, PASSENGER RIGHTS ADVOCATE: The real need is for more competition, not less. This is an industry that needs mavericks and not more monoliths.

OSWALD: In an industry where passenger rights are already a hot issue, this merger could spark more controversy. A passenger rights bill introduced by the American Society of Travel Agents in June 1998 never made it off the ground. A passenger fairness act introduced just over a year ago also stalled on Capitol Hill.

Congress asked the airlines to address the issue of customer rights themselves.

RUDEN: You've heard promises over the years, especially in recent years, that the consolidation of the industry the massive number of agreements and understandings and working relationships that the carriers have are going to produce better service and lower prices. And from our point of view, the exact opposite has occurred.

OSWALD: The guidelines for the United-US Airways merger say no increases to domestic fares for two years following the close of the deal, but industry analysts say that doesn't really mean a guarantee airfares won't rise.

CHRIS MCGINNIS, TRAVELSKILLS.COM: They can say whatever they want to right now in order to get this thing passed through, but I doubt seriously that United -- the new United Airlines would sit by and let all the other airlines raise their prices and they would be the holdout not raising their prices.

OSWALD: The combination would create the first carrier with a strong presence all across the United States, something United says will bring air service to a new level for the flying public.

DANNY HOOD, WORLDTRAVEL PARTNERS: I think geographically, if you really look at US Airways shuttle routes between Washington and New York, Washington and Boston, New York-Boston, and you really look at the need that United had for a Southeastern hub, picking up Charlotte, Pittsburgh, some of the East Coast with United's Midwest and West Coast hubs really forms a great national airline.

OSWALD: Options could also expand for frequent flyers. With alliances already in place between United and Delta, and US Airways and American Airlines, passengers could find themselves with more flight choices than ever before. What's more, this could trigger a new trend in the aviation industry.

The concept is only hours old for the consumer, but passengers will have time to get used to the idea. The merger isn't scheduled to happen until sometime in 2001.

Stephanie Oswald, CNN.

(END VIDEOTAPE)

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